Slide 1: Company Update November 2017
COMPANY UPDATE NOVEMBER 2017
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION This presentation contains information and statements that are forward- looking in nature, including, but not limited to, statements containing the words “will”, “is expected”, “forecast”, “annualized”, “target” and similar expressions. Such statements involve known and u
Slide 3: Interfor's Four Regions
INTERFOR’S FOUR REGIONS BC Coast rn s eee eeeeeenaeees : : 320 MMbf (11%) BC Interior i - 2 mills 9, - Cedar, Hem-Fir, : paver taal (25%) Douglas-Fir - Douglas-Fir, Hem-Fir, - Specialty SPF, Cedar ceevecoeeencesececvscoes - Dimension : US Northwest : 635 MMbf (20%) > -4 mills - Hem-Fir, Douglas-Fir,
Slide 4: 4th Largest Lumber Producer
4th LARGEST LUMBER PRODUCER Bbf North American Lumber Production by Company – 2016 6.0 5.0 4.0 3.0 2.0 1.0 - - Capacity Source: Wood Markets Monthly March 2017 4
Slide 5: Interfor Strategic Plan
INTERFOR STRATEGIC PLAN Growth by Acquisition Building Value Operational Excellence 5
Slide 6: Summary
SUMMARY • Solid 2017 results to date: • LTM EBITDA of $250 mm • Strong free cash flow • Leverage reduced to 18% ND/IC • Multi-year strategic capital plan underway: • +/- $150 mm/year capex; $100 mm is high return discretionary • Near term: Two US South projects totaling US$65 million • Increase prod
Slide 7: Lumber Markets
" ius r i | se aa LUMBER MARKETS A INTERFOR Building Value..
Slide 8: Interfor's Diverse Lumber Mix
INTERFOR’S DIVERSE LUMBER MIX Cedar Lumber Sales By Species 1 Hem-Fir Spruce-Pine-Fir 11% Western Dimension 9% Doug Fir/ Larch Southern Southern Yellow Pine 27% Yellow Pine 36% Lodge Pole Pine Lodge Pole/ Ponderosa Pine Cedar 4% 13% (1) By value for YTD Q3-2017 8
Slide 9: North American Driven Business
NORTH AMERICAN DRIVEN BUSINESS Lumber Sales By Market 1 Canada 7% China/Tw/HK USA 6% 73% Other 5% Japan 9% (1) By value for YTD Q3-2017 9
Slide 10: Benchmark Lumber Price & FX Trends
BENCHMARK LUMBER PRICE & FX TRENDS US$/Mbf $C/US$ $500 2016 2017 1.00 2014 2015 $475 CAD/USD FX Rate (Right Axis) Q1 Q2 Q3 Q4 (1) 0.95 SYP Composite Price (Left Axis) $450 WSPF Composite Price (Left Axis) $425 0.90 $400 0.85 $375 $350 0.80 $325 0.75 $300 $275 0.70 $250 0.65 $225 $400 $357 $382 $416
Slide 11: Key Market Drivers
KEY MARKET DRIVERS 2016(1) 2017E(1) 2018E(1) 2019E(1) US Housing Starts - Total (mm) 1.18 1.19 1.28 1.36 Change +1% +8% +6% US Housing Starts - Single Family (mm) 0.78 0.84 0.91 0.99 Change +8% +8% +9% NA Lumber Consumption (Bft) 54.3 57.9 59.4 61.9 Change +7% +3% +4% NA Offshore Exports (Bft) 6.3 6
Slide 12: US/Canada Softwood Lumber Dispute
US/CANADA SOFTWOOD LUMBER DISPUTE • Interfor’s Canadian operations’ shipments to the U.S. represented 16% of company-wide lumber shipments year-to-date 2017. • Approximately 66% of Interfor’s year-to-date 2017 lumber production was US-based. U.S. Countervailing (CV) & Anti-Dumping (AD) Q2/Q3 2017 To
Slide 13: Operations Overview
A INTERFOR Building Value...
Slide 14: Business Comparisons
BUSINESS COMPARISONS BC Interior Dimension Mills • 3 dimension mills in BC southern interior • Modern/low cost operations • Good fiber supply/limited exposure to pine beetle US South Dimension Mills • 9 dimension mills in Georgia, S. Carolina and Arkansas • Low cost wood baskets • Strong geographic
Slide 15: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS A INTERFOR Building Value...
Slide 16: BC Interior: Overview
BC INTERIOR: OVERVIEW Mountain Pine Beetle Cumulative Percentage of Merchantable Forest Volume Killed Since 1999 Adams Lake Very High (>45%) High (31-45%) Moderate (16-30%) Castlegar Low (<16%) None (0%) Grand Forks Source: BC Ministry of Forests 16
Slide 17: BC Interior: Case Study
BC INTERIOR: CASE STUDY 2008-09 2012 2015 Adams Lake, BC Grand Forks, BC Castlegar, BC • 3 MILLS IN GOOD FIBER BASKETS • SIGNIFICANTLY REPOSITIONED THE ASSETS • RE-INVESTMENTS ARE COMPLETE • STRONG CASH FLOW AND ROI • TOP DECILE/QUARTILE EBITDA MARGINS FOR THE BC INTERIOR 17
Slide 18: US South Dimension Mills
US SOUTH DIMENSION MILLS A INTERFOR Building Value..
Slide 19: US South: Overview
US SOUTH: OVERVIEW • 1.3 Billion feet of lumber capacity across 3 States • Largest lumber producer in Georgia • 44% of Interfor’s capacity is in the South 19
Slide 20: US South: Multiple Phases
US SOUTH: MULTIPLE PHASES Phase 1 Phase 2 Phase 3 Phase 4 5 Acquisitions Build Team/ Mill Improvements/ Investment Infrastructure Optimization Program 2013-2015 2016-2017 2018-2022 No/Low Capex ~$100 MM/Yr Initiatives; Annual Discretionary >$35 MM Capex Investment Annual EBITDA Impact 20
Slide 21: US South: Investment Program
US SOUTH: INVESTMENT PROGRAM • A series of machine center upgrades, debottlenecking and optimization projects. • Two initial projects totaling US$65 million: • Meldrim, GA: New continuous kiln, automated grading system and planer upgrades • Monticello, AR: New primary breakdown system, other sawmill
Slide 22: Financial Review
FINANCIAL REVIEW
Slide 23: Historical Financial Results
HISTORICAL FINANCIAL RESULTS Benchmark Lumber Prices ($/Mbf) Production Volumes (Mmbf) $525 WSPF Composite (US$/Mbf) 800 $500 672 WSPF Composite (C$/Mbf) 700 639 618 618 637 628 607 640 655 645 $475 582 567 578 568 $450 SYP Composite (US$/Mbf) 600 495 $425 470 500 418 447 $400 390 400 $375 $350 300
Slide 24: Capital Spending Profile
CAPITAL SPENDING PROFILE US South Investment Program $mm Machine center upgrades, debottlenecking and optimization projects $160 Capital Expenditures - Discretionary Capital Expenditures - Maintenance Castlegar, BC $140 Depreciation, Depletion & Amortization Mill Rebuild $120 Adams Lake, BC $100 Mil
Slide 25: Free Cash Flow Considerations
FREE CASH FLOW CONSIDERATIONS C$mm LTM Adjusted EBITDA (as of 9/30/17) $250 • Significant additional margin uplift opportunities in the US South. Less: Annualized Cash Interest Expense $(14) • Average interest rate ~ 4%. 2017E Maintenance Capex $(55) • 2017E total capex outlook of C$85mm; (Maint. $5
Slide 26: Capital Structure
CAPITAL STRUCTURE Capital Structure Debt Maturity Schedule (C$mm) As of September 30, 2017 As of September 30, 2017 Cash (C$mm) $(72) $100 $90 Debt (C$mm) $250 $80 Prudential Notes (4.17%) Net Debt (C$mm) $178 $70 Book Equity (C$mm) $818 $60 $50 Invested Capital (C$mm) $996 $40 Net Debt / Invested C